Enforceable contracts and audits protect against catastrophic losses and thereby enable cooperation.

Evidence

At the more mundane level of daily life, we may note, with Bernard Barber (1983, 170), that trust can be enhanced by making distrust and devices for social control more effective. How can trust be enhanced by enforceable contract (or by audits with the threat of sanction)? As noted in chapter 4, the enforceable contract or audit may protect a relationship against the worst of all risks it might entail, thereby enabling the parties to cooperate on less risky matters. Without the threat of sanctions, they might have been able to do none of these. — Russell Hardin, Trust and Trustworthiness, 591

Categorization

• XREF: Connects directly to the reader’s analytical project: the enforceable contract is the institutional analogue of the doctor’s wife in Saramago — a third-party guarantor whose mere presence lets cooperation resume. Also echoes the trust/constraint tradeoff from earlier chapters.